When Is a Failed Business, Not a Failed Business?

FailureWhen it was never a business to begin with.

One of the problems I have with all the statistics for failed small businesses, entrepreneurial ventures, and startups, is that many of them weren’t really businesses to begin with.

Dreams or ideas, maybe — but not businesses.

How I Define a Business

I don’t have some grand model of what a business should be. There are many books and consultants out there defining that stuff.

But I’ve known a lot of successful entrepreneurs, and all of their ventures had some basic things in common:

  • They solved a problem – There was a need, and they came up with a way to fulfill that need. Simple as that. Not every one was earth shattering, or changed the world, but it made something better in some way.
  • They brought something unique or special to the marketplace – They utilized their special skills, talents, gifts, and way of looking at the world to make their venture unique. It was an extension of them, and not a direct copy of someone else.
  • They had a real business model – Businesses make money. That’s what they do. You can do something as a hobby, but in order to make it a viable business, you have to have a viable business model.

I’m sure you can find examples of where these items were not met. But when people ask me (and I get asked a lot) what makes a successful business, I always come back to these items.

If you stick to them, and are willing to work your ass off, you’ll be successful. Then you can move on to the next thing.

So, don’t let the statistics scare you. There are really only 2 kinds of failed businesses — those that were never businesses in the first place, and those that were never attempted.

The rest? Learning experiences ;).


  1. Aloha Tony, terrific coaching. I linked to you (above) in my MWA coaching of the day on Ho’okipa (hospitality) because there can be no service to give if we don’t first understand this “business 101” advice you give.

    There are business people who try so very hard, but unfortunately, so much of their work is for naught if they are devoting their efforts to the wrong pursuit. Your three bullet points here are right on the mark (and the money).

  2. Char – Thanks!

    Rosa – I appreciate you including me in your post. It’s amazing how some folks spend so much time working at something, without looking at the basic principles it’s built on. Profit seems to be an afterthought 🙂

    Steve – Glad to have helped.

  3. I suspect the figures on failed businesses include a lot of people who go self-employed and fail, and never really have a business either. A business is an autonomous entity.

    However, I’m sure there are many businesses that fail for other reasons. What about if I open a jacket potato snack shop with my own unique recipes? That appears to satisfy all your requirements for a business, but could fail on location, marketing, poor financial planning, sudden hikes in the price of spuds (as we’re seeing in the UK now), or any number of other factors.

    Similarly, record shops have taken a hammering since the internet made piracy and shopping for back catalogue albums so much easier. But they were viable businesses until then.

    You’re right that successful businesses have the traits you identify, but having them does not alone guarantee success.

  4. Sean – You make an excellent point, but I think you’re missing a couple of things:

    First, the examples you listed don’t meet the business model criteria. A bad (or inflexible) business model is even MORE detrimental in meat-space than online. The record store is a perfect example. I even had a t-shirt that addressed the music industry that said something like “Your failed business model is not my problem.” A business model has to evolve to meet the market.

    Second, even if all the criteria are met, most entrepreneurs would not consider a misstep to be a failure. You learn, adjust, and keep moving forward. That was why I called them learning experiences.

    But I get where you’re coming from, and there are still “failures.” I’ve had some myself, but as I said, I chalked them up to a lesson, and took what I could to make it better.

  5. I guess we’re saying the point at which the business model stops working is the point at which the business fails and recognising that it’s possible for perfectly viable businesses to have their business model threatened by the market or competition at any time.

    But it does feel a bit circular to say the business fails when the business model stops being viable and the company fails to adjust, given the range of things that could cause the business model to break down.

  6. Sean – My approach in the post was from the perspective of not having a viable model in the first place, since much of the statistics relate to startups.

    But failing to adjust your model to the changing landscape is even worse. Especially if you had a viable model to begin with. I call it “anticipating the puck” after a quote attributed to Wayne Gretzky about skating to where the puck is going to be as opposed to where it is. Or in Ben Mack’s words (and book) Think Two Products Ahead.

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